New landscape for education and employment Christopher Pissarides on how COVID-19 will change work and education
At the first event of our Salon Virtual Series we had the pleasure of talking to Sir Christopher Pissarides, Nobel Laureate in Economics and Regius Professor at the London School of Economics, about the impact of COVID-19 on work and education. We have followed up with him asking for more insights on some of his most interesting hypotheses.
Sir Christopher Pissarides, what was your key takeaway from our recent virtual discussion?
The risk of a pandemic has always been present, virologists had warned, we had epidemics in the past and yet we completely ignored those risks. We have now become aware that a pandemic can effectively close our economy down and that more might come. We have all rushed into research how to deal with it; virologists, epidemiologists, economists, psychologists, companies and even politicians talk about the “R number” as if it is something that they have always known about – and more to the point, understood. Sudden big shocks of this nature in the past, which changed the way we did things, have been associated with wars. COVID-19 is a shock of that magnitude: it will change the way we do things.
I still think the workers most at risk are the same ones that were at risk before the pandemic due to the new technologies. The pandemic has made labor a less valuable factor of production and capital a more valuable one, because capital can continue producing whatever the public health risks, but labor needs to consider them. So, replacing labor with capital will continue and most likely accelerate. New jobs at risk are the ones for personal service of all kinds, as many people will revert to “self-service” – what we call in economics “home production”, to avoid unnecessary contact with unknown people. Recently the trend has been to “marketize” home production, in areas like food consumption (eating out instead of at home) entertainment (going out instead of staying home and watching TV), cleaning (hiring a cleaner or taking things to the cleaners instead of doing it oneself) etc. This process is likely to be checked and may even reverse.
Real estate, or “land” as we call it in economics, is one of the inputs into production. Traditionally we have entrepreneurship, labor, capital and land. If we look at what company requirements will be after COVID-19 we see more value to capital, because machines do not infect each other, and especially to land because both workers and customers (e.g., in restaurants) will need to have more space between them. In this sense, I believe real estate will be more valuable. Such developments already took place in the past; for example, fans of popular sports like football used to crowd small stadiums by standing shoulder to shoulder; after disasters like the Hillsborough tragedy in Britain in 1989, safety considerations forced them to introduce seating, which requires more space. Stadiums now occupy more land per person – and the price of the additional land forced a rise in ticket prices. This kind of development will now apply to many more activities. Restaurants will no longer be viable if they hire some crammed “intimate” space and fill it up with small tables. They will need space to keep their tables apart. The same will apply to many more services and even production units.
I was both surprised and pleased to learn that the models that epidemiologists use to assess the spread of a disease and its impact on the population are very similar in formal structure to the models that I used in the past to organize my thoughts on the problem of unemployment and jobs. After all, we can think of a worker who loses her job as an “infected” one, as she withdraws from production, and one who is ready to take a job as a “vulnerable” one, looking to make contact with a firm. From the formal standpoint, the differences are attractive research ideas. For example, in the labor market if you are “vulnerable” to job opportunities you succeed when you make contact with a firm; in epidemics if you are vulnerable to the disease you fail if you make contact with an infected individual. Social distancing helps control an epidemic, but it is bad for jobs. These are important areas of research bringing together public health and markets with frictions, and they are grounding me in my study in a way that brings back memories of my earlier life as an assistant professor at the LSE.
COVID-19 has redirected research and brought different disciplines together more than any other historical event. Epidemiologists were working on their own models and economists on theirs, and we had not realized how close to each other they were, until the coronavirus forced us to read each other’s work. Medical and pharmaceutical research have become essential for the economy and society, since the discovery of a vaccine or a cure will completely change not only the medical but also the economic landscape. COVID-19 is a public health issue that is having a huge impact on the economy and our mental well-being. Collaboration between epidemiological and medical research on the one hand and economic, social and psychological research on the other are essential. International collaboration is also vital, as we are more likely to reach successful outcomes with more people involved and countries have different experiences that can help each other. Most scientists believe that if China was more open to information provision from November 2019 to January 2020, we would not have had the damage to society and economy that we have experienced since the coronavirus left its borders.
Both historically and in the recent past the structural transformations in our economies were driven by technology. The introduction of computers in production beginning in the 1980s, automation through robots in the 1990s, and artificial intelligence more recently have brought manufacturing employment down in most countries and decimated the middle of the jobs distribution in most sectors of the economy. In this scenario, the jobs that are shielded from digital technologies are mainly ones that involve human interaction; such as care, hospitality, the creative industries and travel for pleasure. But, the arrival of COVID-19 has shocked precisely these jobs. Public health reasons are now forcing us to rethink how we organize jobs in the sectors involving human contact. So on the one hand we have a situation where automation is likely to increase – where possible – to reduce reliance on social interaction, and on the other hand, job creation in the sectors that involve human interaction will – at best – be delayed, as companies rethink the way they organize their activities in light of public health issues. The situation does not bode well for jobs in the short to medium run.
It is essential that workers be prepared to learn new skills as we move along, either in response to the new technologies but also now, in response to COVID-19, which is changing how we organize work. Companies cannot be expected to take on the full cost of lifelong learning, even if it is geared to the future needs of the company, because trained workers may leave a company and work for a competitor. In addition, the unemployed who do not have employers to fall back on will need to be trained as well. In this respect every economy needs generous help from the government; it is essential that the training and lifelong learning be done in the company sector, not the public sector, as companies know the needs of the market much better than governments do. But, governments need to finance this training to make it work successfully.
We are still learning how remote working is affecting gender employment. On the one hand, jobs involving social interaction are dominated by women and cannot be done well remotely. But, on the other hand, women do a lot more unpaid work at home for the household, and thus might be the first to choose remote working. Additionally, because of COVID-19, remote working is increasing the unpaid work that men do at home, such as childcare and house maintenance, and reducing women’s, but not to the extent needed to bring equality across the genders. A literature is emerging that shows that gender diversity is good for a company, both in terms of traditional objectives such as a good return to shareholders, but also in terms of innovation and serving the interests of stakeholders, including employees and customers. Firms need to consider this when planning their organizational changes in response to the pandemic.
I strongly believe that at least up to PhD level, educational institutions should be equipping students with a “portfolio” of skills; some science, math, economics, sociology, psychology and management. This will prepare young people for entry into the labor market and more specialized learning at the company level. All these “enabling” skills, in other words a good educational background to enable more specialization, will be essential. We cannot know what skills will be needed in the future because technology is changing so fast. We know that we will need more social skills and this is an area that is neglected by our educational institutions.
I am still in the process of finishing up previous research on the impact of digital technology on jobs and more generally on the efficiency of the European Union labor market, which was part of a project that the European Research Council were kind and generous enough to fund. But, in the last couple of months I started research with other economists from elsewhere in Europe on the economic modeling of epidemics and the implied impact on the labor market. I am co-chairing the Institute for the Future of Work, based in London, which is a new Institute concerned with job quality and smooth worker transitions, and it provides an umbrella that brings together the different strands of my research on the labor market for public dissemination.